Divestment, Not Shareholder Resolutions

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Howie Hawkins hhawkins@igc.org
Fossil fuel divestment by the NYS Common Retirement Fund would be a shot heard round the world. Coming from the financial capital of the world, from the third largest pension fund in the US, from one of the best-managed and most fully-funded pension funds in the US, divestment would make a powerful statement heard by the public, by policy makers, and by major investors. That statement would that say fossil fuel investments are destroying the climate and are risky for investors. It would underscore the urgent need for large-scale investments to rapidly convert to a sustainable, climate-safe energy system based on clean renewables, efficiency, and conservation.

Shareholder resolutions have not and will not have these kinds of impacts. Shareholder resolutions are elitist. They are inside baseball known only to those who search for them in the financial media and corporate reports and filings. By excluding the public, shareholder resolutions have little to no impact on policy because only mass public concern and action has the power to move government to put a proper price on carbon and make large-scale investments in clean renewables. Energy corporations will not move to clean renewables until carbon pricing and public investments make private investments in renewables more profitable than fossil fuel investments.

Shareholder resolutions almost never win. Management has the proxies to defeat resolutions. See, as a very relevant case in point, the repeated resolutions from Comptroller DiNapoli on behalf of the NYS CRF’s $1.3 billion stake in Exxon Mobil to ban discrimination against gays, which was again defeated last May by a 80 percent to 20 percent vote on management’s recommendation. If NYS CRF shareholder resolutions cannot move Exxon Mobil to join almost all of the rest of the corporate world on a simple non-discrimination policy, it is just not plausible that resolutions will change Exxon Mobil’s expressed intent to profit from its hundreds of billions of dollars worth of fossil fuel reserves in order to focus on clean renewable energy.

Exxon Mobil will not change until public policy gives it no choice. Divestment, not shareholder resolutions, are needed to move the public and then public policy. Shareholder resolutions will not educate and inspire masses of people to speak up and act for a climate-safe energy transition because few hear about them. They are at best symbolic and far weaker as a symbol than divestment, in both meaning and the size of the audience.

I saw this divestment vs. shareholder resolutions argument play out in the anti-apartheid movement of the 1960s to 1980s. I became aware of the demand for divestment and sanctions in high school in the San Francisco Bay Area in the late 1960s from protests against U.S. bank loans to South Africa by civil rights and student organizations and from boycotts of South African cargo by the International Longshore and Warehouse Union. In college in New England in the wake of the Soweto Uprising of June 1976, I was one of the organizers of the Northeast Coalition for the Liberation of Southern Africa that mobilized campus campaigns for college divestment. Ten years later, I was one of the carpenters who pre-fabricated a barn board shanty town that we trucked in and dropped off to students demanding divestment at the Dartmouth College Green in November 1985. That highly publicized protest triggered a wave of pro-divestment shanty towns on campuses and soon an accelerating trend of divestment by colleges, churches, and pension funds (including New York City, but regrettably not New York State). By October 1986, the U.S. Comprehensive Anti-Apartheid Act was adopted by a two-thirds vote of both houses of Congress to override President Reagan’s veto. Though it would take a few years for the U.S. government to actually enforce the sanctions against South Africa, by 1990 the sanctions were ruining the apartheid regime’s economic base, leading to apartheid regime to release Mandela and hold multi-racial elections for a post-apartheid government, which were the U.S. conditions for lifting the sanctions.

The Comprehensive Anti-Apartheid Act was introduced to Congress in 1972. But it went nowhere as corporations promoted the Sullivan Principles, a code of conduct for doing business in South Africa, in response to the rise of the movement for divestment after the Soweto Uprising. As an alternative to divestment, trustees for college, church, and pension funds promulgated shareholder resolutions for the Sullivan Principles and sometimes selective divestment, such as asking banks to loan to the private sector in South Africa but not to the state or state-owned corporations. The Sullivan Principles and shareholder resolutions were sold as “constructive engagement,” which was the official U.S. policy under the Carter and Reagan administrations. Nothing basic changed in South Africa until the U.S. imposed sanctions at the end of 1986.

Just as divestment from corporations doing business in apartheid South Africa was consistent with the demand for comprehensive economic sanctions by the liberation movement in South Africa fighting apartheid, divestment from fossil fuels is consistent with the demand of the climate action movement to leave most fossil fuel reserves in the ground and start now to build the infrastructure to utilize energy safely from wind, water, and sunlight.

Divestment makes a clear statement, in a way shareholder resolutions cannot, that can move public opinion and public policy toward real climate action.

While the political impact of divestment on public opinion and public policy is its biggest impact, divestment by the NYS CRF could have an economic impact as well. Pensions funds today hold 16 percent of all stock in U.S.
corporations. Divestment by the NYS CRF would send a strong message to other pension funds to divest. This is what happened once the anti-apartheid divestments began to grow in the mid 1980s. If divestment starts to roll through pension funds, all other investors may start to head for the exit door to get ahead of a bursting carbon bubble and stranded assets. The resulting fall in energy corporation share prices could give further impetus to the policy impact of divestment in moving both government and the energy corporations to focus on building a climate-safe energy system.

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